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Measure to shift Citizens policies to unregulated insurers squeezes through House

In a narrow vote on Friday, Florida's House passed a bill that would allow so-called “surplus lines” carriers to take over policies from Citizens Property Insurance, if they meet certain criteria.

Surplus lines carriers are not regulated by the Office of Insurance Regulation and can differ greatly from the state’s admitted insurers, a point that opponents of the bill pushed repeatedly.

“Everyone agrees that Citizens needs to be smaller, but the way to do that is not to allow essentially unregulated companies to move in like vultures,” said Sean Shaw, founder of Policyholders of Florida. “This is essentially deregulating the insurance market in Florida for rates.” 

Bill sponsor, Rep. Jim Boyd, R-Bradenton, included several safeguards to raise the barrier of entry for out-of-state insurers looking to pick up clients in the state. For example, the carrier would have to have at least $50 million in surplus, an A.M. Best Financial Strength Rating of A- or better and enough resources to withstand two massive hurricane hits. The insurer also must offer homeowners coverage that is similar to their Citizens policy.

“Surplus lines carriers have been [operating] in this marketplace for years on the commercial side and actually they’re very good, very strong and very competitive,” Boyd said.

Still, opponents of the bill pointed out some major differences between Citizens and surplus lines insurers, which typically have higher premiums. For example, surplus lines carriers can raise their rates by any amount, and if they become insolvent, the Florida Insurance Guaranty Association will not offer homeowners a safety net.

Under the law, homeowners could be automatically shifted into a surplus lines account if they do not opt out. However, consumers who are unhappy with their new surplus carrier could later revert back to Citizens.

Citizens, with nearly 1.5 million policies, is the largest insurer in the state and is exposed to more than $500 billion in potential claims. Because of that massive exposure, Citizens policyholders could be liable for multiple assessments, or charges, after a major storm hits. Surplus lines carriers may offer homeowners an alternative to the over-extended state-run insurer, Boyd said.

The bill is one of several measures this year that look to increase competition within the state’s insurance market, which proponents argue is necessary to bring down overall costs. Boyd argued that the bill could affect 50,000 policies or more.

The bill, which has one more stop in the Senate before a full vote, passed the House by a slim margin, with a 66-48 vote.

Rep. Frank Artiles, R-Miami, voted against the measure, calling it a “Band-Aid on a sucking chest wound.”